one i own. >> western digital. >> bank of america. i like this name. meredith whitney talked about dividend potential for next year. i like it a lot. >> steven weiss? >> thank you. i like bank of america too for my friend pete here. but i will talk about aig. i think it'll be a great company again next year. put a dividend in there. buy it. >> which they want to do. >> they want to do. >> he's done a phenomenal job. like gm, everybody made money. >> is that too much time? >> way too much time. >> are you 50? >> no, not yet. >> that does it for us. don't forget to catch "money in motion" and options this evening. have a great evening. follow me on twitter. and power starts now. and we welcome you to "power lunch." we have three major news conferences in washington, d.c. president obama will nominate

senator john kerry to be his next secretary of state. harry reid will be on the senate floor and house minority leader nancy pelosi will discuss the cliff crisis. with plan b history, washington is scrambling to get a deal done. the markets however are decidedly worried. dow jones has been down triple digits almost all session. we are off our worst lefs, down about 174 point a few moments ago. down 152 on the dow. 17 to the minus side and nasdaq is off almost 40. let's go to washington where john har wood is standing by with the latest on the fiscal cliff follies. john? >> all follies so far, sue. we had house speaker john boehner come out today and have a news conference explaining the failure of his plan b last night which stunned a lot of people because both boehner and eric cantor majority leader said they were confident they had the most to pass it. what he said today at a news conference is that there were

members who had a perception which he said was incorrect. it would raise taxes. that why the thing went down. here is the speaker. >> there was a perception created that that vote last night was going to increase taxes. now i disagree with that characterization of the bill. but that impression was out there. now we had a number of our members who just really didn't want to be perceived as having to raise taxes. that's the real issue. >> now the interesting thing about that statement from john boehner is, he says that wasn't a tax increase bill. well, guess what? the same logic applies to the president's proposal of raising taxes on people who make more than $250,000 a year. because under boehner's logic those taxes will go up anyway undercurrent law. watch for that to come back in this debate. but the most important thing now is the action shifted to the senate where the president is going to talk to harry reid, presumably talking to mitch mcconnell, republican leader,

and try to see what they can work out on a bipartisan basis that can pass the united states senate. in addition to nancy pelosi who will speak in a few minutes, harry reid is about to speak on the senate floor and that could be significant in terms of describing the way forward. sue? >> indeed, john. when the president does speak later this afternoon, about a half an hour from now, we heard he will nominate senator john kerry as the next secretary of state. what are you hearing on that point and how will the process go forward? >> he is going to nominate john kerry, secretary of state. that process has been in development for some time. when susan rice withdrew over the criticism attached to her from the benghazi incident, it left john kerry as really the principal candidate for that decision. we are told that is the only announcement the president will make today. well not hear about defense where leon panetta is headed to leave that post. >> reminder, we carry theory the president's address live just

shortly on "power lunch." michelle, over to you. >> yeah, we are waiting for a lot of stuff, aren't we sue? right now, kevin brady, republican from texas, a deputy whip in the house, joining economic senior member of house ways and means, joining us live from capitol hill. representative brady, let's start with plan b. as a whip, if our audience members doesn't # don't understand what a whip does, you are supposed to help whip up votes. that didn't happen last night. you failed. what went wrong? >> we do. we count noses. try to get 218 unified republican congress to move bills. we weren't able to do that last night. good conservatives in our conference saw the bill in different ways, i thought, 3.9 trillion in tax cuts, new spending cuts. forcing the president to address his deficit crisis. i thought that was a good step forward. >> so you voted for this, absolutely? >> yes, i absolutely would.

because for the first time, it would force this president to come to the table with the plan -- >> representative, i'm so sorry. we have to toss to harry reid who has just taken the floor. please stick around so you can comment afterwards. >> -- couldn't pass the senate. turns out it couldn't pass the house either. it is too bad speaker boehner wasted a week in this futile political stunt, and that's all we can call it, mr. president. at least now house republicans have gotten the message loud and clear that comprehensive -- a comprehensive solution that a looming fiscal cliff will need to be a bipartisan solution. no comprehensive agreement can pass either chamber without both democrats and republican votes. which means any solution will have to ask the most fortunate among us to pay a little more, so partisanship doesn't take the nation to the brink of default.

nothing that has passed the house of representatives fits that, nothing. a few days ago president obama and speaker boehner seemed poised to strike a grand bargain. we've heard that before. instead of making hard choices of compromising as president obama has been willing to do, the speaker retreated to his corner and resorted to political stunts. but that stunt fell flat. it is time for the speaker and all republicans to return to the negotiating table. we've never left, mr. president. it is time for republicans to work with us to find the middle ground. that's the only hope of reverting the devastating impacts of fiscal cliff. mr. president, the fiscal cliff needs to be avoided. and in the meantime, the speaker should bring the middle class tax cut passed by the senate five months ago to the floor of the house for a vote.

we know it would pass. all he has to do is let democrat vote with some republicans. it will pass. clock is ticking until the nation goes over the fiscal cliff and taxes go up for every family in america. but there is still time for the speaker to hit the brakes and avoid that cliff. we don't need the thelma and louise rejection over that cliff, mr. president. the senate passed bill would protect 98% of families and 97% of small business trespassing crippling tax hikes while president obama and the speaker work towards agreement. and it should be comprehensive. if they want to insure taxes don't go up on january 1st, they should simply pass the senate bill. the only reason boehner hasn't brought our bill to the floor sooner is because he knows it will pass. he worked for a day or two seeing if he could bring that up so it wouldn't pass. that didn't work either. americans are not fooled by the

failure to bring some solution to a vote. they are tired of excuses. they expect action. let me be very plain. there is nothing preventing the speaker from taking up our bill and giving middle class families certainty. so i say to my friend, the speaker, this isn't a game. it isn't about scoring political point or putting wins on the board. it will be very serious consequences for millions of families if congress fails to compromise. there will be very serious consequences for a country if congress fails to compromise. time for the speaker to return to the negotiating table ready to compromise. time for the house, especially the house republicans, to realize what's at stake. i repeat, the $250,000 program would pass overwhelmingly in the house. it is up to the speaker to let that vote occur. >> all right, now, let's go to representative nancy pelosi who is also now addressing reporters.

>> this is now. let's go back to the negotiation table. we have no right to walk out the door of congress with no clear path to a resolution of this challenge. it's time to get back on track. time to get back to negotiating table. we must work together in a bipartisan way it create jobs, grow the economy, strengthen the middle class, reduce the deficit and do so in a responsible way. we can and we must get the job done now. i yield to the distinguished democratic mr. hold. >> representative brady was not able to stay with us. let's bring back in john harwood. what is your assessment of what is next and how it will hold out? >> doesn't sound very promising to hear the he is not jat majority leader say the house speaker simply has it bring our bill to a vote.

>> john, we've got to interrupt you sorry. we are going to mitch mcconnell. >> so democrats spent all day yesterday literally all day yesterday, defeating a bill that would have made current tax rates permanent for more than 99% of americans and they laughed about it. ten days to go until the fiscal cliff and they laugh bed it. i don't know if anyone looked at a calendar lately, but we are about out of time here, folks. this isn't funny. people's livelihoods are at stake here. the u.s. economy is at stake here. millions upon millions of families are counting on us to do something. look, it's the president's job. it is his job to find a solution that can pass the congress. he is the only one who can do it. this isn't john boehner's problem to solve. he has done his part.

he's bent over backwards. mr. president, how about rallying your party around a solution? how about getting democrats to support something? i've said it many types before, we simply cannot solve the problems we face unless and until the president of the united states either finds the will or develops the ability to leave. this is a moment that calls for presidential leadership. that the way out of this. ity it's that simple. does anyone wonder why we keep going from crisis to crisis around here? anybody notice a pattern? this doesn't have to be a crisis. this was an opportunity. but once again, the president ignored it. he went out and held rallies, gave partisan speeches, even after he had been re-elected. as i said yesterday, i think it is obvious at this point the president wants it go off the cliff. i know most of the american people don't want that. so today i'm going to make an

offer, with ten days to go, we have an obligation it act on something. something. that can pass the house and the senate. and if the president won't propose it, if democrats won't propose it, i will. earlier this year, the house passed a bill that extends current rates on everyone for one year. one year. with instructions for expedited comprehensive tax reform by next year. we could bring up this house pass bill. if the majority leader has a plan that can get 60 votes on the senate, break through the disarray on his own caucus and build bipartisan support, offer that as an amendment and then let's vote. let's vote on amendments from all sides. and then let's go to conference with the house of representatives. they have already passed a bill, one that i support to prevent tax hike on all-americans and prevent the tax code.

why don't we take it up here and let's get this done. it is called legislating. that's what we used to do in congress. now democrats may be popping champagne corks today about bringing down plan b, but all their effort to do so yesterday won't protect a single tax payer from a massive tax hike in just a few weeks. the american people are waiting. surely we can do better than this. let's do it. i yield the floor. >> let's get back to john harwood. mitch mcconnell there, john, offering up what seems to be an old plan. let's go back to the legislation passed in the house that extend the tax cuts for everyone in exchange for the promise of tax reform in the future. is that going to fly at all? >> no. and now we've scent perfect crack up in washington. you had the house of representatives bringing up what the speaker described as a new plan and then killing it himself because i didn't have the votes

saying, the house should pass the bill they passed earlier this year knowing we wouldn't pass it. and the minority leader said no, they should pass the bill the house passed knowing the senate wouldn't pass it. so we now have a finger-pointing squer size. i hope and believe there are still private negotiations going on, at least at the staff level and maybe a higher level than that to try to salvage the situation but they public display that we just saw was pretty discouraging, if you take it on its face. >> what's next, then? >> i believe that what is next is conversations today, tomorrow, sunday, involving perhaps the president and harry reid and mitch mcconnell. maybe even john boehner to try to work something out as fall back. could you either have a new attempt at a comprehensive deal or you could have what people are calling a small deal. that would have a temporary

extension of the tax cuts for people under $250,000 a year and a promise to work on tax reform after that. a temporary, like one month, turn off of the sequester and a doc fix for medicare and extension of unemployment benefits. that's the minimal plan that could possibly happen next week. >> oh, gosh, i'm so glad we have you to explain how the sausage gets made. thank you. sue? >> breaking news. scott cone is on the news with us. scott, what do you have. >> a federal grand jury in new york returned a three count indictment against the former sac portfolio manager accused in what federal officials call the most lucrative insider trading scheme ever. he was charged earlier under a criminal complaint, a shot across the bow, this indictment signals that if there were efforts and talks under way, to get him to plead guilty and possibly testify against his

former boss, steven cohen, those efforts have broken down. again, matthew martoma indicted by a federal grand jury. he could plead guilty and enter into a plea deal. now steaks have gotten higher. if you are steven cohen and his lawyers, you are probably breathing a little bit after sigh of relief. sue? >> i was going to say, put some distance there. thank you very much, scott cohen. >> the market doesn't like what is going on in washington. that's an understatement. we are approaching the lows of a statement. we are off 166 points on the dow. we will get perspective on the market in just a moment. "power lunch" is back in two minutes. they could save a lot of money on their car insurance by switching to geico...they may even make you their best man. may i have the rings please? ah, helzberg diamonds. nice choice, mate. ...and now in the presence of these guests we join this loving couple. oh dear...

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all right. we are down 167 points on the dow jones industrial average. everybody down here is watching washington and nobody is happy about it. some perspective now on the markets and reaction to what we just heard from kenny and from bob. kenny, you were shaking your head, so angry at what is going on down there. the mark set telling them to get to work. and it's ridiculous, nothing is happening. >> i think the mark set tired of giving them a free pass. i think the last couple weeks, the market has been giving them room to negotiate. i think after what we saw last night, the mark set disgusted as it rightly should be, as our investors. >> thank you. sorry. >> i think this story today that they are trying to say this is strategic on boehner's part. i'm scratching my head.

what is strategic in grand standing about how to pass it. then pulling out because he had no support at all. then today the senator saying, they misunderstood. what did they misunderstand? >> yeah. i think the important thing -- by the way, john harwood is hysterical describing what happened. that perfect. there are people trying to buy the lows of the day right after the open. remember this is quadruple witching. so there is a lot of volume down here. now we are essentially sitting a lows of the day. as we break through the lows, people buying earlier in the day, say -- >> why would they buy when washington can't get its act together? we are calling it the fiscal cliff follies for a reason. it's ridiculous. >> i think you could argue there is an upside and down side here. there could be a break through over the weekend and it could happen. markets corally. >> do you really think there would be a break through over the weekend? i know you're the eternal

optimist. >> i'm a glass half full guy. there could be some bill that could virtually appeal to everybody and the house will have to pass it. >> you think? >> that's a stretch for me. if that were the case, this negotiation has been going on 16 months. why are we waiting for the day before christmas to come up with something to pass. >> do you sell into this market today? >> i think you sell into the rally. if there is one, i think you sell into it. reid urging the senate bill passed in july, that contains sequestering. it does deal with tax issues but he sequestration is there. >> thanks, guys. today marks one week after the shooting tragedy in newtown, connecticut. today the nra is speaking out. they add big major suggestion for the country. is it a good idea? we'll discuss when we come back. i realize tdd#: 1-800-345-2550 that i haven't even looked away from my screen.

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the connecticut shootings last week. about an hour later the national rife association held what it called a news conference in the nation's capitol. hampton has details. ham top? >> michelle, the nra broke its silence today, with a blistering assault for those calling for sensible gun control in the aftermath of the death of the children and school teachers. they were interrupted at least twice by some blaming the nra of having quote blood on its hands. but the nra is taking on critics and is calling for armed security officers in every school in america. >> the only thin that stops a bad guy from a gun is a good guy with a gun. the nra pledging money and resources to create what it calls a national safety shield program. at the same time, blasting media, it says, from profiting

from a culture of violence. michelle? >> what kind of reaction is he getting to the suggestion that every school in america have an armed police officer? are we hearing anybody from capitol hill or advocacy groups for anybody that will agree or disagree? >> from the gun control advocacy groups, obviously outrage, blistering attacks on what la pierre has said. but again strange silence we have had all week specifically from the republican leadership on, you know, it's what's next as far as getting in the whole dialogue of sensible gun controls and other aspects of really the whole problem that we all agree needs to be reexamined. >> thank you, hampton. sue? >> you got it. >> michelle, as you know, we are awaiting president obama's news conference. he is expected to nominate senator john kerry as next secretary of state. well take that live when it does occur. plus, with the fiscal cliff follies upon us, how do you protect your portfolio? well talk with the chief executive officer of northern

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we are waiting yet another news conference. this one from president obama where he expected to nominate

john kerry as the new secretary of state. well take it live when it happens. we think it is just in a few minutes. sue? >> michelle, thanks. gold prices are closing right now. we have a little bit of bid under the gold market, probably because of the triple digit. sharon? >> actually, gold prices, very resilient in this session, sue. it is remarkable how well gold has done, traders say. in light of what we see with the strength of the the dollar and equity selling off. we have such tremendous liquidation earlier this week. the biggest loss we've seen in the price of gold since june and we are looking at now the strength coming back here with some short covering as well as some people just trying to figure out what they are doing for the end of the year. keep in mind though, over this quarter, we have seen gold prices post their worst quarter since the third quarter of 2008. also some of what we are seeing today might just be what is happening in a very oversold marketplace. gold prices for the year, they

are poised for their 12th straight annual gain. still been a pretty good year for gold compared to other commodities and we are perhaps looking for maybe a little bit more settling out here before the end of the year. but a lot of traders saying they have made their bet for the year in the gold market. they will just stay on the side lines. back to you. >> thank you very much. done here on the floor of the new york stock exchange, bob is here once again. we are held hostage to washington and it is a friday and as you mentioned, the witch going on today. very heavy volume. this is a dangerous market for a lot of investors today. >> yeah. right now the risk is do the down side. unfortunately, the reid, pelosi, mcconnell, dualing pressers, added nothing to the information flow. and unfortunately, didn't do much for the dow or the overall markes to the lift them off of their lows. take a look at dow industrials. big problem is we broke below early morning lows at about

11:30. that's not a good sign. because traders who buy in, trying to trade around the low positions of the day see that, and it makes them much more nervous. hard for us to lift in the middle of the day. take a look at major sectors of big movers recently in the bank stocks and all of the home building stocks, the ones down the most. and of course, the havens, dollar and gold are up today. believe it or not, we hit the highest levels in the vicks. sue? >> thank you. up town to the nasdaq with seema mody is following tech stocks for us. >> we see hardware, software, chip names. look at social media names. you see facebook down 3%. groupon down 7%. and zynga following suit. the wirs on the nasdaq, research in motion with earnings report not as much of an issue but

comment made by the company's management around the revenue service model. a couple of down grades hitting the stock -- hitting the tip as well as stock down about 20%. if you are looking for a bright spot take a look at red hammock, that's why that stock is up and a name in biotech space. announcing a deal with pfizer. licensing drug delivery platform to pfizer for $515 million. keep in mind it is a small market cap below a billion dollars. back to you. >> thank you very much, seema. the failure of plan b last night, rick santelli, did that help sell off in the bond market? >> it helped some of the buying, good question, michelle. if we look at a 24-hour of tens, with you can see as we started to digest, some soft equity prices overnight in response to the fact nobody could pass anything because nobody is realistic about what the players want within the framework of

congress. that caused buying. let's expand michelle's question. a lot of guys looking at equities to trade especially after some of the post statement selling pressures abated. they are correlating but a little whim maniy, especially after the turn where most of the selling run its course. many think it is end of year issues more than anything else. let's get back to the dollar. we have listened to the gold comment, we know the dollar is better. might be up today but go to the end of last year and you could say we are still down for the year. but within striking distance or potential trade towards unchange. michelle, sue, back to you. >> thank you very much, rick. fiscal chess match in washington is weighing on investors today as we wrap up 2012. what are the key things to focus on when you rebalance your portfolio for the new year? back for her monthly appearance on "power lunch" is katie nixon.

and she has over $180 billion in assets under management. good to see you again katie. welcome back. >> thanks, sue. >> you think there is near term risk but longer term you are looking for better growth. how much risk near term? >> it is unfortunate we are in this situation. risk is to the down side what we are seeing over the last 24 hours suggests that political partisanship in washington marchs on. so the optimism around any kind of grand bargain certainly dissipated. but it is important for investors to look beyond the cliff. beyond really the valley. we think there will be some weakness in first half of 2013 due to the fiscal restraint. however, if you look beyond the first half into the second half, we certainly see the economic momentum coming back. >> and you have changed your positions since we last talked. you did have a waiting in gold. you reduced that, why? >> our waiting in gold was

really a function of the risk we perceived in the market. that's focused on the situation in europe and we think that mario draghi announcement of late summer took it off the table. we do, however, still maintain a holding in gold because we recognize that it is not an all clear sign. >> you like natural resources. the odd kmodity plague has been broughtal for a lot of investors. why do you like that and how do you play it, specifically? >> there are a couple of reasons we like commodities. we think global growth could surprise on the upside in 2013. specifically the u.s. as well as emerging market picture. so the leverage that you get through the commodity complex is direct. secondly, perhaps not as important as the growth story though, is inflation protection you get from commodities. and there is a high correlation between inflation and commodity prices. so although we don't see inflation as near term problem, we want to protect our client portfolios longer term. >> you like a merging markets,

but you're very specific about the markets that you like. not all of them are performing the way you would like them to be. and japan has been a risk. >> japan certainly, we continue it see a lot of problems economically in japan. though we are heartened by announcements that have come out politically that would affect the monetary policy. we expect mormon tarry policy going forward. we think broadly of markets like china and brazil. these are markets that started to increase monetary easing. that have started to restructure their economies and certainly we think china has avoided very nicely a hard landing and will be back for growth track next year. >> talk to me about getting yield. that what everybody want right now. how are you doing it? high yield or investment grade securities or where? >> we are underweighted and they don't provide much of a yield these days. they are on high yield and we've had a barn burner of the year

with high yield. we still think you can get high digit returns in 2013. and we are looking at global infrastructure in real estate as providing a nice sustainable yield for investors. >> the big debate down here for the past couple of days after the fed made its announcement is whether or not that will prick the bond bubble. where whether we are in a bond bubble or whether there was a bond bubble. where do you stand on that? >> it's interesting. when i think after bubble, i think of something that can burst and drag values down to zero. one thing that bonds have in your favor is a core value. to the extent there is a bond bubble, you might see entrichment in the value of some of your bonds. our interest rate forecast is not for spike and rates by any stretch. we don't think the bond bubble will be pricked any time soon. >> thank you. so nice to see you. >> thank you. >> michelle, over to you. >> we expect president obama in

the next two minutes. let's bring in john harwood. we expect him to talk about john kerry being the next secretary of state. >> john mccain just put out a statement. >> great. here is president obama. >> -- took office, we were in the middle of two wars and al qaeda was in its safe havens. america was standing in a world of suffering. we began a new jer yaf leadership. we entered the war in iraq, put will al qaeda war on the path to defeat and we are winding down from the war in afghanistan. we have global challenges and stood up for human dignity. we still of course face great challenges. but today, i can say with pride that the united states is safer,

stronger, and more respected in the world. in this work, i've been grateful for an extraordinary national security team. toml don lan has been part of that and one of the most important people is our outstanding secretary of state, my friend, secretary hillary clinton. hillary wanted very much to be here today. but she continues to recuperate. i had a chance to talk to her earlier today and she is in good spirits. and could not be more excited about the announcement that i'm making. over the last four years, hillary has been everywhere. both in terms of travels and we have seen her good through more countries as secretary of state and tireless work to restore global leadership. she is looking forward to going back to work and i'm looking forward to paying tribute to her

extraordinary service inner days to come. today i'm looking hahead to the my next term. john's entire life has prepared him for this role. as a soochb sworn officer he has a deep respect for the men and women of the state department. the role they play in advancing our values, risk they undertaken a sacrifices they make along with their families. having served with will havor in vietnam, he understands we have a responsibility to use american power wisely. especially our military power. and he knowes from personal experience that when we send our troops in harm's way, we must give them the sound strategy, clear mission, and the resources that they need to get the job done. in an extraordinarily distinguished senate career,

john played a central role in every major foreign policy debate for nearly 30 years. as we turn the page on a decade of war, he understands that we've got to harness all elements of american power and ensure they are working together. diplomatic and development. economic and political. military intelligence as well as power of our values, which inspire so many people around the world. as john has said, we are an exceptional nation, not because we say we are. but because we do exceptional things. and i would say that one of the more exceptional things we've seen in recent decades is when john helped lead the way along with folks like john mccain and others to restore our diplomatic ties with vietnam. when we returned to the country where he andsome others fought so long ago, it sent a powerful message of progress and of healing.

over these many years jorge posa posada, john earned the respect of leaders from around the world. he earned the respect and trust of senate colleagues, democrats and republicans. i think it is fair to say that few individuals know as many presidents and prime ministers or grasp our foreign policies as firmly as john kerry. and this makes him a perfect choice to guide us in diplomacy in the years ahead. on a personal level, john has been a great friend. i appreciated john's partnership in helping advance so many of my foreign policies, including the new start treaty. i called on his talent and diplomatic skips on several occasions. on challenges from sudan, south sudan, to the situation in afghanistan. each time he has been exemplary.

i was proud to serve with him on the foreign relations committee under the tut ledge of joe biden. but of course nothing brings two people closer together than weeks of debate prep. john, i'm looking forward to working with you instead of debating you. finally i want to thank teresa. as a former interpreter as united nations, she appreciates our interests can be advanced in partnership with others. teresa, thank you so much for being john's partner this this next endeavor. i have to say, you know, i think that i speak for john and joe and myself. and we just last a funeral, a

man who skem exemplified the best in tradition. i know john, it won't be easy to leave the senate that you love. and i think it is fair it say that there are going to be some challenges ahead. an uncertain world will continue to test our nation. but even with all of the challenges that we face, i have never been more confident, more optimistic that if we act with wisdom and with purpose, and if we are guided by our values and we remind what binds us together as americans, the united states will continue to lead in this world for our life times. so john, i'm very grateful you have agreed to take on this new assignment. i'm confident that senate will confirm you quickly. i guess you won't be able to appear and reside at the same time, so we will have to figure out how that works. but i know you will be an

outstanding secretary of state. thank you so much. congratulations. [ applause ] >> we were wondering if the president was going to take any questions. doesn't appear to be the case. john harwood, this going to be smooth sailing? >> yes, i think so. just before that little appearance in the announcement by the president, both lindsay graham and john mccain said favorable things about john kerry's presence in the senate. john mccain indicated that he would not face roadblocks to confirmation. and so i think, you know, there are multiple elements in play. the senator's stature, the fact that, one, he comes out of senate. there is traditionally deference shown to former members. we will see if chuck hagel is

dominated as secretary of defense, and we don't know if he gets that same deference. but at least in this case, with stepping aside of susan rice, it is pretty clear now that john kerry will be confirmed by senate and the question will be, what happens to that senate seat in massachusetts, which democrats dearly want to hold on to. they were burned in that state in 2010, as you know, michelle. >> oh, my gosh, another massachusetts congressional election. holy smokes. all right. thank you, john. john harwood in washington. what a busy day. don't move. we will talk more about the market reaction. nobody rising above this far in washington, right after this break. ♪ [ male announcer ] this is karen and jeremiah. they don't know it yet, but they're gonna fall in love, get married, have a couple of kids, [ children laughing ] move to the country, and live a long, happy life together where they almost never fight about money. [ dog barks ] because right after they get married,

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washington? insight from washington post economic policy reporter and from capitol hill, politico's senior congressional reporter. welcome to "power lunch" guy webs good to see you. let me start with you. what happens at this point? can anything be done or are we going over the cliff? >> the chances offi going over e cliff is very, very serious at this point. what do they do? they are trying to figure that out themselves right now. do they bring up a bill right now and try to force speaker boehner's hand and have him accept any sort of tax increase, at least allow a vote and something that could pass in the house? mainly by democratic votes? that is unclear at this point. right now, harry reid is calling on the house to pass their enate bill and speaker boehner is relenting at there point. >> zachary, you cover economic policy. can you give me any clues of

what is happening behind the scenes? are republicans saying, good gosh, if they would means test medicare and change retirement age, i would move to 500 grand. or on the democratic side, if only they would fall to this level, then i would agree to blah blah blah. is there anything like that happening behind the scenes? or is this just a cold stalemate? >> i think on the republican side, what you see is that republicans just can't get enough votes to raise tax rates. you see, boehner had a plan where he was just spending cuts. and just increasing tax rates on millionaires and he couldn't get enough caucus. >> that's my question to you, zachary. that caucus that is so hard core to the right, there isn't a single thing. if the democrat had an epiphany and said, we love ryan he plan for vouchers for medicare, would the tea party vote to raise taxes? >> the only possibility there is

you want to vote against something before you vote for it. we saw that years ago. so maybe it was a symbolic vote. but this principle of not voting for any tax increase and rates seems to be enviable. >> so you are telling me, there is nothing democrats could offer to make them budge? anything? >> i don't know if there is anything. but nothing being discussed as a conceivable option. >> so you would agree with that we're going over the cliff? >> i would say there's a very good chance. i think that democrat have some incentive and to do that because they come back january 3rd with a stronger hand in the senate. more seats in the house. and presumably a better chance of getting what they want through congress at that point. >> how do you think -- so i will ask the same question i asked zachary. who is saying what behind the scenes? if only they would do a "i would finally budge on this." i don't think we are that point any more. i think right now we are at a

point where both sides are in their own corners and once there is -- once we see, we get closer and closer to december 31st, maybe at that point one side caves. and the chances are, right now that that would be the republicans giving that they have a much weaker hand right now after last night's failure and given that next year democrats have a stronger hand in congress. >> thank you so much for joining us, mano and zachary. >> along those lines, michelle, fiscal cliff stalemate continues. 11 days to go. where do stocks go from here, as markets await a deal. right now they are doing down. we will talk to two traders about that in a minute. [ male announcer ] when it comes to the financial obstacles

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to the markets now. we have heavy pressure. joining us is michael gerka from spectrum asset management. he sat the cne. kenny, we are going into the week pend. what do you do and what are you going to be watching for over the weekend? both good and bad. >> certainly looking for progress, which i don't think we will get. and from this perspective, i

think this market attempts to rally late into the afternoon. i think you have to sell it. i think we will be disappointed and the mark set tired of giving out a fre pass to investors and washington and saying everything will be fine, they will do it. i think eventually we will do it but i don't think it is coming this weekend and i think there is more to move to the down side before it stabilizes. >> michelle? >> michael, what about this -- so plan b fails last night. that halts the sell off in the bond market. however, what we have seen, is this a sign of things to come? should we worry about interest rates rising here michael, what do you think? >> it is too early for that. but my analogy for the last month has been really simple. i look at the nba, basketball, a great analogy to the fiscal cliff. every week is a quarter okay? as we go from one week to the next, second and third quarter, as closing stops today, we are approaching the fourth quarter or last week until we get this final rezujs of what happened last night was a time-out was

called. beth parties and caucuses went to the bench and reassembled. when everyone is at the bench, that's when the market is most abrupt. the difference between the nba and this market scenario is the fact that in the nba when the time-out is called, the clock stops. in this area, when everyone is on the bench, the clock is still moving. that's the number one reason why you continue it see volatility in this market. >> what trades are you putting on? to either edge your portfolio, how are you playing it? >> just from a technical perspective, big occurrence for me is that one of the broadest measures is russell 2000. we hit the high or resistance level in '07 and we failed from there. what i'm watching is my barometer continues to be gold and how the dollar trades against the euro and british pound. dollar strength is adverse. every time we saw something happen like last night. that's not changing. watch precious metals.

i think trades are a precursor. >> kenny bb what is your precursor to tell what you to do next? >> gold is up today. you will continue to see gold move higher. based on this uncertainty around. as the market gets weaker, you have to start to get yourself back under equities. this is a great opportunity that a lot of money has been waiting for. >> why? >> because i think, as a lot of money on the side lines, that's aching to go back into equities. it is looking for a reason to go back in. once the market backs off, i do think that 2013 is setting itself up to be grind higher. but we are going to see money back in equities. you want to be in front of that, not behind that curve. >> michael, if we do go over the fiscal cliff, does the market care whether or not the u.s. is downgraded? >> the market cares a great deal if that happens in long-term. but much like kenny was trying is surmise there, like what happens is the the equity